Reference no: EM132546192

Presented below is an ageing schedule for Emerald Ltd. Emerald Ltd is not currently registered for GST.

Number of days past due

Customer                Total          Not yet due                    1-30        31-60         61-90            Over 90

Anders             $20,000            $ 9,000                 $ 11,000

Baietto           30,000                  $30,000

Cyrs              50,000                15,000                  5,000           $30,000

Dejong            14,000                                                            $14,000

Others             126,000             92,000                  15,000       13,000          6,000

Total                240,000         137,000                 29,000        24,000          30,000           20,000

Emerald Ltd estimates of bad debts are as follows:

Age of Account Estimated % uncollectable

Not yet due 2%

1-30 days past due 5%

31-60 days past due 10%

61-90 days past due 24%

Over 90 days 50%

As at 30 June 2018, the unadjusted balance in the Allowance for Doubtful Debts is $8,000 credit.

Required:

Prepare general journal entries as required below. Ignore narrations for all journal entries.

Question i) Prepare the adjusting entry for estimated uncollectible accounts at 30 June 2018. Show all workings.

Question ii) An extract from the balance sheet of Emerald Ltd at 30 June 2018 showing how Accounts Receivable would be reported.

Question iii) Emerald Ltd was notified by a legal firm on 15th September 2018 that Dejong was bankrupt and could not pay his account. Prepare the journal entry to write off this account

Question iv) On 15th November 2018, a cheque for $10,000 was received from Dejong as part payment of the amount due. No further payment is expected. Prepare the journal entry for this payment.

Question v) Prepare the adjusting journal entry for estimated uncollectible accounts at 30 June 2018 if Emerald Ltd uses the percentage of net credit sales method at 1.5% for estimating uncollectible accounts. Credit sales for the year were $320,000 and sales returns and allowances were $15,000. 

Question vi) An alternative to the allowance method of accounting for bad debts is the direct write-off method. Discuss the limitations of this method.